Author : Jaehyung Choi
Publisher :
ISBN 13 :
Total Pages : 28 pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Maximum Drawdown, Recovery and Momentum by : Jaehyung Choi
Download or read book Maximum Drawdown, Recovery and Momentum written by Jaehyung Choi and published by . This book was released on 2015 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test predictability on asset price using stock selection rules based on maximum drawdown and consecutive recovery. Monthly momentum- and weekly contrarian-style portfolios ranked by the alternative selection criteria are implemented in various asset classes. Regardless of market, the alternative ranking rules are superior in forecasting asset prices and capturing cross-sectional return differentials. In a monthly period, alternative portfolios constructed by maximum drawdown measures dominate other momentum portfolios including the cumulative return-based momentum portfolios. Recovery-related stock selection criteria are the best ranking measures for predicting mean-reversion in a weekly scale. Prediction on future directions becomes more consistent, because the alternative portfolios are less riskier in various reward-risk measures such as Sharpe ratio, VaR, CVaR and maximum drawdown. In the Carhart four-factor analysis, higher factor-neutral intercepts for the alternative strategies are another evidence for the robust prediction by the alternative stock selection rules.